Latin America is set to become a major oil producer this decade
foreign exchange and fiscal revenues. Perhaps no company in the world is as closely linked to its country’s collapse as Venezuela’s state oil firm, PDVSA. At its peak in 1998, it provided 5% of global supply.
But that year Hugo Chávez, a left-wing autocrat, was elected president. In 2003, after workers from PDVSA went on strike, Chávez fired 18,000 employees—half the workforce—and replaced them with loyalists. He later demanded that foreign oil firms renegotiate their contracts to give PDVSA majority control.
It became a cash cow to buy political support. Production of Venezuela’s mostly heavy, dense oil has plummeted from 3.4m barrels a day in 1998 to 700,000 today. Corruption is rife at PDVSA, which is also subject to American sanctions.
Between January 2020 and March 2023, it received only $4bn in payments, though oil exports were worth $25bn. Yet Nicolás Maduro, Chávez’s hand-picked successor, is clinging to rosy predictions. After Russia invaded Ukraine he said PDVSA could “grow one, two, three million barrels per day if needed".
Venezuela’s case is extreme, but mismanagement and policy instability are the norm in the region. According to Francisco Monaldi of Rice University in Houston, if all of the region’s oil were exploited with the same expertise and in a similar regulatory environment as in Texas, Latin America would be producing more oil than the United States, instead of about half. Colombia, Ecuador and Mexico produced only 3.8% of global output in 2021.
Output is set to shrink due to a mixture of bad geology and bad policy, or both. Take Mexico, whose ageing fields are sputtering. Production peaked in 2004 and has roughly fallen by half.
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